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The Sydney Morning Herald: Oil up again over fear of supply breaks

Christian Schmollinger and Gavin Evans
November 10, 2007

CRUDE oil rose for the first time in three days in New York on concern supply disruptions may hamper US efforts to store fuel for peak winter demand.

A fire at Valero Energy Corporation’s refinery in Port Arthur, Texas, the company’s largest, left processing rates “somewhat reduced”, a company spokesman said. Strong currents in the Gulf of Mexico are delaying the restart of the 150,000 barrel-a-day Mars platform, shut for maintenance since November 3, Royal Dutch Shell said.

“The supply situation seems serious so people are seeing this as a buying opportunity,” said Tetsu Emori, a fund manager with Astmax Futures Ltd in Tokyo. “For the bullish players it’s a good time to take a fresh long position.”

Crude oil for December delivery rose as much as $US1.02, or 1.1 per cent, to $US96.48 in after-hours electronic trading on the New York Mercantile Exchange.

The contract fell 91 cents, or 0.9 per cent, to $US95.46 yesterday after the Federal Reserve chief, Ben Bernanke, told a congressional committee that the economy of the US, the world’s biggest oil user, is likely to “slow noticeably” this quarter. Futures slid from a record $US98.62 the day before after US equities declined to an eight-week low.

Oil stockpiles in the US fell to 311.9 million barrels last week, the third straight decline, even as imports rose and refining stalled at a seven-month low, the Department of Energy said.

“The market is still very concerned about the drawdown in the inventories,” said Tom Hartmann, a commodity broker at Altavest Worldwide Trading in California. “It’s just going to be an ongoing concern that if we get any kind of supply disruption, we’re not going to be able to meet demand.”

Brent crude oil for December settlement rose as much as 68 cents, or 0.7 per cent, to $US93.47 a barrel on the London ICE Futures Europe exchange. It reached $95.19 on November 7, the highest since trading began in 1988.

The three-alarm blaze at the Valero Port Arthur refinery broke out in a heater at a distillate hydrotreating unit at 7am, local time, and was quickly contained, Bill Day, a company spokesman, said. The refinery is capable of processing 325,000 barrels of oil a day, Valero said. The unit affected by the fire, one of two distillate hydro-treaters at the plant, was shut. “Most process units are in operation,” Mr Day said.

Mr Day said the plant was operating at “somewhat reduced” processing rates before the fire because of problems transporting petroleum coke to the port.

New York futures have gained 20 per cent in the past month, driven primarily by the sliding US dollar pushing investors towards physical assets including oil and gold, Altavest’s Mr Hartmann said.

While investors are reluctant to buy at current prices, US equity markets are not likely to drop enough near-term to prevent them buying oil in any dips, he said.

Bloomberg

http://www.smh.com.au/news/business/oil-up-again-over-fear-of-supply-breaks/2007/11/09/1194329506831.html

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